Duke Energy’s Jim Rogers Should Listen to His New Partner

Progress Energy CEO Bill Johnson, whose company will (pending approval) be swallowed by larger electric utility Duke Energy, has been making the media rounds. He has discussed the planned merger, which he says is necessary because of looming capital projects that will be needed to meet electricity demand, but he also warned regulators in Washington of the dangers posed by the heightened government regulatory environment:

“Call this regulatory picture what you will – “a train wreck” … “a tsunami” … or an overdue change that’s ultimately do-able,” Johnson said. “It’s not hard to imagine the customer pushback that will occur because of the resulting increase in the price of electricity. This pushback will come from industrial customers struggling to be competitive, and from residential customers and small businesses struggling to make ends meet. As indicated, I’m especially sensitive to the households of modest means, where energy represents a disproportionately large share of disposable income.”

This is what many groups who represent low-income, minority, small businesses and senior citizens have been saying for years. What is ironic is that Progress would form its partnership with Duke, which as a member of the U.S. Climate Action Partnership has lobbied for policies (especially cap-and-trade) that dramatically increase those regulations that Johnson criticizes. Duke’s Jim Rogers is known as one of the top rent-seeking CEOs in the country (perhaps second only to Government Electric’s Jeffrey Immelt).

Specifically Johnson spoke of his concern over a “daunting convergence of new federal rules and aggressive deadlines coming at us on multiple fronts” – pending changes on air, water and land rules under the Environmental Protection Agency (EPA), changing rules on nuclear safety from the Nuclear Regulatory Commission (NRC) and the new grid reliability rules from the North American Electric Reliability Corporation (NERC). Also from his remarks:

What’s worrisome is the insufficient attention to the cumulative effects on utilities and our customers. I’m not suggesting we face a doomsday scenario, but I do believe the current fragmented approach, coupled with rapid-compliance deadlines, is a recipe for inefficiency, system reliability challenges and unnecessarily high cost.

Johnson pointed out a study by the Edison Electrical Institute which reported, among other things, that utilities will be forced to retire up to one-fourth of coal-fired power plants earlier than planned; that those plants are heavily concentrated in the Southeast, Midwest and Mid-Atlantic states, where the cost impacts will be felt more strongly; and the incremental capital expenditures due to the requirements could reach $247 billion by 2020.

“These costs are real,” Johnson told the regulators, “and whether through rate cases or energy markets, they ultimately will be borne by utility customers – homes, churches, schools, small businesses and large industries.”

Answering the charge that utilities have always been able to meet past environmental regulations, Johnson added:

According to this argument, the industry is overstating the challenge – “crying wolf.” But the last significant wave of new environmental rules was driven by the Clean Air Act Amendments of 1990. And, in that case, the industry had a decade to identify and implement the most cost-effective solutions.

This new wave of EPA rules is on a much broader front – SO2, NOx, mercury, coal ash, water, greenhouse gases – and a much faster track. We’re being required to execute much more change in a much smaller window of time.

The bottom line is the coming effect on our electric bills will be painful, all in pursuit of a dubious-at-best global warming problem. And now Johnson is marrying one of the practitioners of alarmism, as he complains about his new spouse’s habits.

Paul Chesser is an associate fellow for the National Legal and Policy Center and is executive director for the American Tradition Institute.